Skyline Report: NWA's commercial real estate market is hot

Northwest Arkansas' commercial real estate market is strong, according to the biannual commercial Arvest Skyline Report released Tuesday.

The big picture: The area's overall commercial vacancy rate was 6.4% as of June 30, up from 5.6% last Dec. 31 and 5.8% in June 2022.

• The rate includes all commercial properties — from class A office space to warehouses.

Why it matters: Commercial-property occupancy is one indicator of an area's overall economic health. Vacancy rates in the single digits are generally good for developers but can drive up rent and make desirable space tough to find.

Zoom out: Nationally, office vacancies hit an all-time high this spring of 12.9%, as employees continue to work both remotely and in the office following the COVID-19 pandemic.

• Another report from August shows the national rate hit 16.4% during the second quarter.

By the numbers: Medical office space grew to a 5.7% vacancy rate at the end of June, up from 5.1% at the beginning of the year.

• The vacancy rate for office space in NWA was up slightly to 8.8% at the end of June, compared to 8.4% six months earlier.
• The office/retail submarket rate was 5.8%, up from 5%.
• Warehouse space, which had a vacancy rate below 1% in mid-2022, rose to 3.6% as of June 30 due to the addition of 311,760 new square feet to the market.

Between the lines: Realtors have told Axios that much of the warehouse space in NWA is being used for e-commerce, as well as storage for ongoing work at the sprawling new Walmart headquarters under construction in Bentonville.

What they're saying: "Commercial real estate in Northwest Arkansas is best described as healthy and balanced, which is somewhat unique given the national market," Mervin Jebaraj, director of the Center for Business and Economic Research at the University of Arkansas, said in a news release.

What we're watching: Building permits — an indicator of commercial space being developed in the near future — totaled nearly $194 million in the first half of this year, down from $241 million during the second half of 2022.

• Of the $194 million in building permits, $168.5 million were not related to construction of Walmart's new home office.